Good morning, and thank you for joining Bentley Systems Q2 2025 results. I'm Eric Boyer, Bentley's Investor Relations Officer. On the webcast today, we have Bentley Systems Executive Chair, Greg Bentley; Chief Executive Officer, Nicholas Cumins; and Chief Financial Officer, Werner Andre. This webcast includes forward-looking statements made as of August 6, 2025, regarding the future results of operations and financial position, business strategy and plans and objectives for future operations of Bentley Systems, Incorporated. All such statements made in or contained during this webcast other than statements of historical facts are forward-looking statements. This webcast will be available for replay on Bentley Systems' Investor Relations website at investors.bentley.com on August 6, 2025. After our presentation, we will conclude with Q&A. And with that, let me introduce the Executive Chair of Bentley Systems, Greg Bentley.

Good morning, and thanks to each of you for your interest in BSY. Please pardon my voice, which is suffering from a summer cold. CEO, Nicholas; and CFO, Werner, will, as always, report in detail Bentley Systems' continued excellent operating and financial results for '25 Q2, and thus, for the first half of 2025 as we track consistently towards our outlook range for this full year. Earlier this year, in reviewing 24 Q4 I looked back over the years since BSY's IPO in 2020 to quantify that our outlook range for 2025 would complete the process of at least doubling over these 5 years each of our key financial metrics of ARR, revenues, adjusted operating income less stock-based compensation and free cash flows while minimizing equity dilution. Then most recently, in reviewing '25 Q1, I likewise looked back 5 years to quantify the respects in which we've purposefully gained further business resilience over the span. It is even more clear this quarter that we're currently benefiting from those improvements. Our excellent operating performance to date in 2025 is in keeping with a primary sustaining long-term growth driver over this period and which will prevail foreseeably. Going digital has become the enduring priority for infrastructure engineering, in particular, because of pervasive resource constraints. To keep up with the world's imperatives for infrastructure performance, resilience and adaptation, each BSY user and account needs each year to achieve step functions in productivity and value generation through enhanced utilization of software, cloud services and AI. To help quantify such progress and software consumption per engineer, I would like now to, again, but for the last time, I think, look back over 5 years but this time with reference to external market data. This slide, which we still use in our intro deck today, shows global counts of engineers and related technicians and their software expenditures as tabulated by U.K. global research firm, Cambashi. Conveniently, for our process of monitoring the long-term trend, this last data that we had on engineering employment and spending is for 2019, immediately preceding BSY's IPO. We originally compared spending per engineer/technician for infrastructure engineering to that of product engineering to glean a data point for the market potential headroom. But now for the purpose of this look-back, let's examine the changes in just infrastructure engineering spending over time as Cambashi has just provided an update, which slightly refines 2019, and which most importantly, introduces the most recent year for which this data, including engineering employment is available, 2023. I do not find it surprising that over these 4 years, the total number of infrastructure engineers and supporting technicians has only increased by about 1% per year on average. While there isn't sufficient granularity in both data sets to establish this, I believe that even this nominal increase is concentrated in less developed countries, while I believe that in countries like the U.S., infrastructure engineering retirements have exceeded new graduates. Most significantly, Cambashi finds that software spending by infrastructure engineer/technician has grown at a compounded annual growth rate of about 10% over this period. And this is in nominal rather than constant currencies. Cambashi's estimate is that the constant currency growth rate was a full percent higher. By virtue of BSY's constant currency revenue growth rate during the period, we somewhat outgained this broader market. Hence, software spending per infrastructure engineer/technician has grown about 9% in nominal currencies or indeed approximately 10% in constant currencies over this period. Even so, the $514 annually per engineer or technician tends to appear low compared to averages for BSY users. Usefully, for this newly available 2023 data, Cambashi has provided refinements for better understanding. To start with, we can now focus on employment and spending just for engineers rather than also including the technician categories, which are rather miscellaneous and less representative of BSY's primary user profile. See here Cambashi's observation that in 2023, 17.6 million infrastructure engineers globally spent $10.2 billion on engineering and GIS software averaging a relatively higher annual spending of $579 per engineer. For this new 2023 data, Cambashi also provides analysis of employment and spending down to the level of countries classified together within the 5 quintile tiers of per capita GDP. The wide variation in average spending is striking to me. The engineers in the most developed Level 1 countries, while nearly the least numerous, spend the significant plurality of the global total, averaging over $1,900 per year per engineer. This is generally consistent with BSY's average and global uniform pricing and utilization for E365. So the numerical bulk of infrastructure engineers in less developed country levels represent a multiple of long-term upside opportunity as they inevitably will tend to catch up in going digital and in expenditures to do so. Now coming back to Bentley Systems and our standing as the market leader in so many infrastructure engineering market segments, as we show in our own assessment of the competitive landscape in this slide from our intro deck, let's examine Cambashi data to understand how so much of this $10 billion in software spending by infrastructure engineers obviously goes elsewhere than to BSY. To do this, let's parse the full $14 billion of now 2024 software revenue, which Cambashi ascribes to BIM. This term originally referred to building information modeling decades ago, but has come to connote as here a catch-all for what could otherwise be described as AEC for architecture, engineering and construction as opposed to product engineering or manufacturing. Within this total, BIM design is not only the largest submarket, but we believe it is the prerequisite to success throughout the others. The greatest ultimate opportunity is for digital twins to support infrastructure, operations and maintenance. Although this submarket is only nascent so far, we think our asset analytics initiative portends its comparatively unlimited potential monetized per asset rather than per engineer. But the potential compounding value of a digital twin depends significantly upon its assimilation of the digital context, digital components and digital chronology from the BIM design. So here, per Cambashi, are the market shares within the $6.5 billion of BIM design revenues. The largest by far is for Autodesk followed significantly by Bentley, Schneider, Hexagon, Nemetschek, Trimble, and in all China, I have grouped together all the Chinese companies identified by Cambashi listed here in the fine print. To help understand the widely varied mix across infrastructure segments per competitor within BIM design, Cambashi analyzes each company's such revenues by product category within plant; architectural, which includes mechanical, electrical and plumbing or MEP; civil; and structural. Looking here at the relative proportions for each company, one sees that every one of these punitive competitors has a considerably different primary focus than Bentley Systems. At Bentley Systems, we don't break out product revenues in these same categories. and I suspect that Cambashi's estimates here seem to discount Seequent's major share of geotechnical and environmental software used in civil engineering. While we have a comprehensive portfolio across all disciplines required for major infrastructure projects, including their plant and building engineering aspects, our focus is characterized by civil in supporting structural products, primarily for horizontal infrastructure networks. By contrast, Hexagon and Schneider's design products are clearly focused primarily on plant engineering. Nemetschek design products are concentrated in architectural/MEP. Trimble's design products are primarily divided between architectural MEP and structural to support such buildings. China has more or less official state-owned software for its country-specific structural analysis code and many competitors for building software. Finally, the primary design product focus for our principal competitor, Autodesk, is architectural/MEP for vertical infrastructure buildings. Within Autodesk's civil product share, its offerings for civil site design likewise associated with buildings loom large. And as you may recall, we at BSY see this as a substantial competitive upside opportunity. Our BIM design software peers and competitors are worthy and resourceful. While our space is desirable and envied, each of these others have a principal focus that is clearly different. I believe that we are favorably differentiated by virtue of our established franchise as the outright market leader in comprehensive infrastructure engineering software, particularly for the horizontal networks of public work/utilities, grids, roads and bridges, rail and transit, water and wastewater and resources and the geo professional disciplines, structural disciplines and project delivery collaboration across all of this. Given the world's prevailing imperatives for infrastructure performance, resilience and adaptation, I wouldn't trade positions with any design software peer or competitor. Notwithstanding this favorable competitive backdrop, our consistent execution should not be taken for granted, and I commend our management and colleagues for '25 Q2. Over now to Nicholas.

Thank you, Greg. We delivered another strong quarter despite ongoing global uncertainties. This performance underscores the resilience of our business model and the strength of our end markets driven by secular infrastructure investment. As demand for better and more resilient infrastructure continues to outpace the available engineering resource capacity, our software plays a crucial role in helping infrastructure engineers achieve more with less. Our strong first half performance reinforces our confidence in meeting our full year outlook based on low double-digit ARR growth, continued margin expansion of approximately 100 basis points and robust free cash flow generation, consistent with our long-term financial framework. Turning to Q2 highlights. ARR grew 11.5% year-over-year and 12% when excluding the impact of China. Growth in the quarter was underpinned by a net revenue retention rate of 109%. E365 continues to be a growth driver with renewals consistently reflecting stronger commitment levels. The willingness of accounts to commit to higher contractual floors in return for corresponding ceilings signals their confidence in the strength and sustainability of their own demand environment. In Q2, we once again added 300 basis points of ARR growth from new logos, primarily within the SMB segment. And for the 14th consecutive quarter, we added more than 600 new SMB logos through our online store. Retention within the segment remained high, further signaling confidence in the demand environment, this time from smaller accounts that are arguably more sensitive to economic uncertainty. Turning to our tone of business by infrastructure sector. Resources was our fastest-growing sector this quarter with Seequent delivering a particularly strong performance. Notably, growth for Seequent was led by mining, outpacing civil for the first time in 6 quarters. While we are seeing early signs of improvement in mining exploration, it is still too soon to call it a market recovery. Public works and utilities delivered another solid quarter performing in line with the company overall supported by sustained global infrastructure investment. The needed focus on grid resilience is particularly benefiting Power Line Systems. Growth in the industrial sector remained modest, while commercial facilities was flat. Performance across regions in Q2 remained largely consistent with prior quarters. Growth in the Americas was once again solid with Latin America continuing to stand out. In the U.S., our accounts remain confident in their outlook for the year despite ongoing uncertainty related to tariffs, policy shifts and regulatory changes. There's also increased optimism that Congress will now prioritize meaningful permitting legislation. The combination of executive orders, updated agency guidelines, recent court rulings and bipartisan state-level initiatives all signal momentum towards comprehensive permitting reform, particularly in areas such as transmission, critical minerals and other strategic verticals. Our Power Line Systems and Seequent businesses, both standout growth drivers since their acquisition 3.5 and 4 years ago, respectively, are especially well positioned to benefit from these developments. Also noteworthy, Congress has already begun working on the surface transportation reauthorization of the IIJA 1.5 years before its scheduled expiration, a clear indication that civil infrastructure investment remains a national priority. In EMEA, we delivered another quarter of solid growth with the Middle East continuing to lead the region, followed by the U.K. Investment remained strong across transportation, energy and water infrastructure while momentum continues to build in defense-related projects, data centers and nuclear. Together, these trends reflect a broadening base of demand. Recent announcements in the U.K. and Europe point to a continued supportive funding environment into the foreseeable future. In June, the U.K. government published its 10-year infrastructure strategy, which earmarks GBP 725 billion in long-term funding and aims to attract private investment into its national infrastructure. And in July, the European Commission put forward its EUR 1.8 trillion proposal for the next long-term EU budget for 2028 to 2034. The proposal clearly prioritizes investment infrastructure and should be a continued tailwind for funding in years to come. In Asia Pacific, the overall performance remained steady. India continued to stand out with positive sentiment across strategic national programs in water and power. ANZ was softer, primarily due to a slowdown in transportation spending in Australia. However, we are well positioned to support major infrastructure projects tied to the 2032 Brisbane Olympics, some of which, like the Cross River Rail, are already in progress with broad activity expected to ramp up near term. China performed in line with our expectations given ongoing economic and geopolitical headwinds and now represents only about 2% of total ARR. Finally, I want to highlight the success of our first-ever season Cesium Developer Conference, which brought more than 400 attendees from around the world to Philadelphia. We acquired Cesium for its market-leading 3D geospatial platform, its talent and its vibrant developer community. All 3 were on display at the conference. Bentley users, representatives from technology leaders like Google and NVIDIA and developers spanning verticals from AEC to government to aerospace learned how we are bringing iTwin capabilities to Cesium, including reality modeling and AI-based feature detection services. Attendees also shared the many ways they're using Cesium to deliver powerful 3D geospatial experiences in applications for the built and natural environment. One example is HNTB, an engineering firm that leverages Cesium and Google's 3D photorealistic tiles to provide precise geospatial context, enabling better-informed decisions for infrastructure design. With this capability, stakeholders can assess projects ranging from single highway interchanges to 30-mile road and rail corridors with greater clarity. By using Cesium, HNTB has reduced the effort required to model existing buildings for contextual detail on long linear projects by up to 80%. We are excited about the opportunities ahead to expand the Cesium developer community and empower it with additional iTwin platform capabilities. And we look forward to sharing the progress we have made integrating Cesium across our broader product portfolio at our upcoming Year in Infrastructure Conference this October in Amsterdam, alongside advancements in AI and Bentley Infrastructure Cloud. And with that, I will turn it over to Werner.

Thank you, Nicholas. We've had a strong first half of the year and are well positioned with respect to our financial outlook range for the year. Total revenues for the second quarter were $364 million, up 10% year-over-year on a reported basis and 9% on a constant currency basis. Year-to-date, total revenues grew 10% on a reported and constant currency basis. For the first quarter and year-to-date, strong growth in subscription revenues was partly offset by a reduction in professional services, and to a lesser extent, in license revenues. Subscription revenues now represent 92% of total revenues, up 2 percentage points from the same period last year, reflecting improvement in the overall quality of our revenues visibility, growth consistency and margin contribution. Subscription revenues grew 12% year-over-year for the quarter in reported and 11% in constant currency. And for the first half, more normalized for mix and timing, subscription revenues grew 12% on a reported and constant currency basis. Our SMB and E365 initiatives continued to be solid contributors. Perpetual license revenues for the quarter were $10 million, down $1 million year-over-year. Perpetual license sales make up only 3% of total revenues and will remain small relative to our recurring revenues. Our less predictable professional services revenues declined 7% for the quarter in reported and 9% in constant currency and now represent 6% of total revenues, down 1 percentage point from the same period last year. It is still the case that the largest portion of these nonrecurring services relate to IBM Maximo implementation and upgrade work. Our last 12 months recurring revenues, which includes subscriptions and a small amount of recurring services, increased by 13% year-over-year in reported and in constant currency and represent 92% of our last 12 months total revenues, up 2 percentage points year-over-year. Our last 12 months constant currency account retention rate remained at 99%, and our constant currency net retention rate rounded down to 109%, led in magnitude by accretion within our consumption-based E365 commercial model. We ended Q2 with ARR of $1.379 billion at quarter-end spot rates. On a constant currency basis, our year-over-year ARR growth rate was 11.5%, consistent with our expectations. Excluding China, our year-over-year constant currency ARR growth rate was 12%. China is now 2% of our total ARR. On a quarterly sequential basis, our constant currency ARR growth rate was 2.7%, slightly below our '24 Q2 sequential growth rate of 2.9% and impacted by the timing of programmatic acquisitions and asset analytics deals. With regards to seasonality, we expect '25 Q3 to be our seasonal low quarter for year-over-year ARR growth due to the timing of potential acquisitions and anticipated asset analytics deals, which were particularly strong in '24 Q2 and '24 Q3 to be closer to year-end in 2025. And the favorable impact from onboarding the Cesium acquisition will be dropping off in '25 Q3. Our GAAP operating income was $84 million for the second quarter and $200 million year-to-date. I have previously explained the impact on our GAAP operating results from deferred compensation plan, liability revaluations and acquisition expenses. Moving on to adjusted operating income less stock-based compensation expense, our primary profitability and margin performance measure, adjusted operating income less SBC expense was $105 million for the quarter, up 10% year-over-year with a margin of 28.9%, up 10 basis points. Year-to-date, adjusted operating income less SBC expense was $231 million, up 11% with a margin of 31.5%, up 40 basis points. Our margin performance for Q2 and year-to-date has been strong, particularly when considering that the year ago period benefited from head cost run rate savings associated with the '23 Q4 strategic realignment program. Our '25 Q2 margin benefited from our mix shift towards higher-margin subscription revenues and from certain discretionary OpEx spend being slightly more back half loaded in 2025 when compared to 2024. We remain confident about delivering our 100 basis points full year margin improvement target. As a reminder, our OpEx seasonality is always more heavily weighted towards the second half with our annual raises occurring as of April 1 each year and our larger promotional and event-related costs also concentrated in the second half of the year. Our free cash flow was $57 million for the quarter and $273 million year-to-date. This is generally consistent with our expectation that based on our seasonality of collections and expenditures, free cash flow for the first half would be on the order of 60% of our full year free cash flow outlook of $415 million to $455 million. In addition, we estimate that our second half of 2025 will see cash tax benefits in the range of $15 million from the recently enacted One Big Beautiful Bill, primarily attributable to the restoring of immediate U.S. tax deductions for domestic R&D expenses. As a result of this tax policy change, we are raising our 2025 free cash flow outlook to a range of $430 million to $470 million from previously $415 million to $455 million. With regards to capital allocation, along with providing sufficiently for our growth initiatives, during the first half of the year we deployed free cash flow as follows: $135 million fully paying down our senior debt, $75 million in effective share repurchases to offset dilution from stock-based compensation, $10 million in convertible senior notes repurchases and EUR 42 million on dividends. With our senior debt being fully paid down, our net debt leverage, including all of our 2026 and 2027 convertible notes as debt was 2.4x adjusted EBITDA, down from 2.9x at the end of 2024. Our strong balance sheet and projected free cash flow generation will sufficiently fund our dividend, share repurchases and growth initiatives, including potential programmatic acquisitions. Our 5-year senior secured credit agreement dating from October 2024 provides a currently undrawn $1.3 billion revolving credit facility. Combined with our strong balance sheet and anticipated future free cash flow generation, this affords sufficient flexibility, if needed, to refinance the January 2026 maturity of $678 million in outstanding convertible debt, while keeping our cash interest thereafter at about the same magnitude as in the recent past. Interest rates on our debt are protected for very low coupons on our convertible notes and very favorable terms on our $200 million interest rate swap expiring in 2030. And finally, with regards to our outlook for the year, our financial performance for '25 Q2 put us in a solid position to deliver within our annual outlook range for ARR growth, revenues, profitability and now increased free cash flow. With regards to foreign exchange rates, for the second quarter, the U.S. dollar has weakened relative to the exchange rates assumed in our 2025 annual financial outlook, resulting in approximately $7 million of incremental revenues from currency and the total first half favorable impact of approximately $8 million. Based on more recent rates where the U.S. dollar has further weakened relative to our outlook rates, if end of July exchange rates would prevail throughout the remainder of the year, our second half GAAP revenues would be positively impacted by approximately $17 million relative to the exchange rates assumed in our 2025 financial outlook. And with that, we are ready for Q&A. Over to Eric to moderate.

Thanks, Werner. Our first question comes from Matt Hedberg from RBC.

Great. I hope you can hear me okay.

Yes.

I wanted to ask about the macros. It sounded like in some of the prepared remarks that macros remained strong, and you called out specifically strength in SMB. I'm curious, did you notice an improvement sequentially now that we're past some of the initial tariff uncertainty? Or is this just kind of business as usual from your perspective?

Yes, Matt, I'll take this one. I would say it's just very consistent, yes. It's a very consistent environment from the standpoint of all the investment that is going into infrastructure. And yes, there's been noise with tariffs, there has been noise with maybe a change of priorities, et cetera. But overall, it's just a very consistent environment. What we're hearing from our accounts is that they are just very positive about their own outlook whether they are big or small accounts. And if there's one thing that is also quite consistent is the fact that there's really no problem with the demand, there's a problem with the capacity. They just don't have enough engineers. And that remains the backdrop for our own demand environment, which is we are uniquely positioned to help them be more productive with the capacity that they have in order to cope with that demand.

Great. Thanks, Matt. The next question comes from Joe Vruwink from Robert Baird.

All right. Great. I thought the TAM analysis was good at the start. One thing that comes to mind that your products are typically thought of as the premium offering in the various disciplines you serve. In premium because of functionality, but oftentimes that also comes with a certain price point. When you think about reaching the long tail of engineers that are spending below a $1,000, let's say, do you have the right product set and right reach, right go-to-market model to effectively address?

I think we have, indeed, the full range. And our traditional product, MicroStation, by which we started the company is really the entry point for engineers to start working with our software, and it remains one of the main growth drivers in SMB. So I think that's quite telling, which is that's where we start. And then when we have accounts who start to use the MicroStation software, they become great targets for upsell to more sophisticated applications that will be more specific to certain assets or to a cross-sell with related engineering applications or collaboration software. So we have the full range. And I mean, a testament to that is just the continued growth that we see in SMB. There's just no slowing down. You heard it in the prepared remarks, more than 600 new logos for the 14th consecutive quarter. And again, very often, those new accounts that we're winning through SMB are actually starting with MicroStation.

Thanks, Joe. Next question from Kristen Owen from Oppenheimer.

I want to double-click on some of the TAM analysis and ask you about the data center opportunity. Is there a way to understand sort of the Bentley Systems total addressable market there, whether it's through energy infrastructure, roads that go out to the data center or even some of the water infrastructure? And beyond that, is there sort of a persona that you're thinking about that you can bundle any sort of potential external partnerships with hyperscalers, asset owners? Just sort of unpack that data center opportunity for us.

I'm going to let Nicholas respond in the main, but I will say that I'm struck during the quarter by the U.S. AI strategy, which articulates that it needs to include an infrastructure investment strategy for the reasons you described. And of course, this isn't limited merely to the place where the data center sits, but the way it's connected up, especially with the electrical grid, that is a particular opportunity for us. But the other aspects of the portfolio beyond merely the building and its structures, our structural analysis software especially is used in that. But a data center is a small city altogether and includes all the other aspects of the ecosystem you mentioned. But Nicholas, you've been looking at this, I think, more in particular.

Well, I will say, Kristen, the way you're looking at it is the way we're looking at it as well, yes, which is, indeed, there's a lot of infrastructure when it comes to data centers that is for the data center itself and then surrounding the data center, as Greg just explained. These are really more like mini-cities or campuses. And then whenever you have, let's say, high spatial density with engineering complexity, this is typically a great opportunity for us. So we do offer software to design many aspects of the data center and the surroundings of the data center. You mentioned the road, of course, the distribution lines, the water and so on and so forth. But we also offer software that helps put all of this together and understand the interrelationships between all of these infrastructure assets. Now I think what's interesting with the hyperscalers is they're obviously software-first. They understand the power of software and they're quite receptive to the notion of let's make sure that when we design, we design well from the start for operations. And then we make sure that there is a digital twin that is being created at the moment of design, which is used to schedule and manage the construction, then be used for the operation of the data center. I'm not talking about the inner operation of the data center, obviously, but all the surrounding infrastructure. I think a good, let's say, testament to that is the uptake of SYNCHRO, which is used quite systematically for the construction modeling of data centers by hyperscalers.

Thanks, Kristen. The next question comes from Jason Celino from KeyBanc.

Great. Werner, I don't know if I heard you correctly, but did you say that the free cash flow guidance was moving up $15 million because of the benefits from the OBBA. I know there are a couple of ways of recognizing the benefit. I mean, not to get too much in the nitty-gritty, but is this the accelerated adoption? Or should we expect multiple years of benefit?

There will be multiple years of benefits, Jason. The $15 million is for the first year and it considers actually that we had prepayments already in the first half of the year. So the normalized annual benefit that we are seeing for '25 would be approximately $10 million higher than the $15 million. But based on the prepayments that we took, this will roll over into the 2026 year. But we are still evaluating, but we don't plan on an accelerated adoption. So that's just a normalized benefit, if you will. And then you will see more benefits coming over there for the following years.

Thanks, Jason. Next question from Siti Panigrahi from Mizuho.

Okay. Maybe we'll move on and come back. Can we get Warren Meyers from Griffin Securities, please?

Yes. This is Warren in for Jay. Quick question, aside from the plan to incorporate Cesium where appropriate in the portfolio, what are some of the other critical development and deliverables for the next 6 to 12 months even if you don't expect an immediate impact on revenues? And related to that, over the past few months, Bentley has exhibited an uptrend in the number of R&D openings while keeping sales openings flat. Could you comment on the thinking behind those recent numbers as well?

All right. So on the first question, let me take a step back and say that our R&D priorities are AI, Cesium and an integration of Cesium integrated across the portfolio and then the deeper integration of Cesium with iTwin into a unique platform for the built and natural environment. So with respect to Cesium and our progress there. So I think in last quarter, we talked about Evo, which is our data and compute platform for geoscience data that is coming out of our Seequent business. And this one has already embraced Cesium as the main user interface. And then as I commented in the prepared remarks, we brought very important iTwin capabilities into the Cesium platform and we announced that at our very first Cesium Developer Conference. The reason why this one is particularly symbolic is you might remember that one of our strategic objectives with the acquisition of Cesium was to leverage the Cesium ecosystem to accelerate the adoption of our iTwin capabilities. And so there you go now, the iTwin capture capabilities that are used to create reality models, be able to visualize that with reality modeling, being able to run AI on it to detect some features, et cetera. All of those capabilities are now immediately available from within the Cesium platform. Now what is also a great validation of that strategy is that one of the longer-term partners of Cesium, which is EarthBrain, a JV, which is majority owned by Komatsu in Japan, has agreed with us to expand our partnership from Cesium to iTwin and to adopt iTwin capture and the iTwin platform in order to support their own applications for construction, simulation and management. Yes. And then just in the last few days, we released MicroStation 2025. So again, our very core product for generic modeling, which now has built in the Cesium integration so you can actually visualize your designs in full 3D geospatial context, including, by the way, with 3D photorealistic tiles that are coming from Google, leveraging the same technology of Cesium. So some very exciting progress there, and there's more to come. There is the integration of Cesium and Bentley Infrastructure Cloud. And a lot of that we'll be discussing at our annual conference in a couple of months now in Amsterdam. Yes. And then to the second question, which is the fact that you see openings in R&D and you see, however, openings in sales quite flat, I will say probably 2 things. One is a clear sign that we are able to scale the business without necessarily throwing people at it on the go-to-market side, right? So it speaks a lot to, again, the strength of our demand environment and the strength of our products. The other thing I will say is we're quite fast and probably a little faster in hiring go-to-market resources than we are hiring in R&D resources. And our big focus when it comes to hiring R&D resources is AI, which again is our #1 priority when it comes to investment this year.

The next question comes from Taylor McGinnis from UBS.

So it seems like you're well on your way to hitting the midpoint or even slightly above the constant currency ARR guide for this year. But in terms of the scenario that could push you to the higher end of the guide to 12.5%, what does that look like? You mentioned the permit reform opportunity earlier on. It sounds like emerging growth opportunities with asset analytics and maybe some of the AI stuff continues to move along nicely. So are there any second half catalysts that you're particularly excited about that could be a source of upside for us to monitor?

Taylor, I believe you mentioned them, and I would like to add that our acquisition strategy this year is centered on asset analytics opportunities instead of broad programmatic acquisitions like in the past. We are selective about these opportunities but remain determined. We haven't made a significant acquisition since last year's Cesium acquisition, which will conclude in this third quarter. However, we are optimistic about potential opportunities for the rest of the year.

Yes, thanks, Taylor. The next question comes from Matthew Bullock from Bank of America.

This is Matt on for Koji Ikeda. I wanted to ask a little bit more about asset analytics. Maybe if you could just help remind us the growth profile there, the run rate today, the key areas of execution focus for that business outside of the programmatic and potentially larger acquisitions in that business line. And then finally, it sounds like there's some seasonality nuance this year, slightly tougher comps from an ARR perspective this quarter and third quarter. Just maybe help us understand the shift in seasonality in 2025.

Matt, I'll say that the business, the asset analytics business, isn't yet of such magnitude that we break it out and track it. What I can say is it contributes a lot of our volatility. Such volatility as we had is largely related to that because the rest of everything is subscription oriented and renewing floors and ceilings and so forth. And asset analytics, we're chasing the major opportunities in the world because we want to get our elbows out and have those proof points. So they're large and lumpy when they come. We have also discovered that sometimes they last only a year because the asset analytics are during a construction phase of something and then you have to sell again to the owner-operator constituencies. And so we're learning this business as we go. And there was reference to the second and third quarters last year in 2024 being when we won the big deals and we're working on a bunch of them now. You may want to speak about one, Nicholas, that has a particular qualitative aspect that we think is auspicious for the future in the case of Blyncsy.

I will. Before I talk about Blyncsy, which is our road monitoring solution, I will say that with the other asset analytics business we have, which is for cell towers, it has indeed been historically volatile because of the reasons that Greg just explained. I think as that business gets bigger, the volatility will decrease, but also as we are refocusing on slightly different type of accounts with slightly different use cases. Historically, we've been working a lot with equipment manufacturers, for example. They will use our software to inspect towers before and after the installation of that equipment. But more and more, we're targeting the actual owners of the cell towers or the mobile operators, and their use case is different because they actually want to monitor those towers on a continuous basis. Therefore, as we win some of their businesses, we will decrease the volatility. But now back to road monitoring solutions, indeed, a very auspicious opportunity here, as Greg just indicated. Traditionally, we are selling to transportation authorities and those can be long cycles, by the way, but very worthwhile. And I think at some point we'll pass the tipping point where there will be so much great examples of success of transportation authorities with our software that others will follow much quicker. But we now have one very large global engineering services firm, which is leveraging the capabilities to offer their own high-end value services to a U.S. territory. The reason why we like that a lot is because it fits exactly our strategy of asset analytics where we don't want necessarily to go after all the owner-creators under the sun. We do want to leverage our strong relationship with engineering services firms. And as they diversify their own business beyond product delivery to go into asset operations and in order to offer these high-value services for asset operations and maintenance, we want to be right there with them with our software, with our technology, with our platform in order to allow them to do that. So we welcome that very positive development, and we hope it's the first of many to come.

Thanks. Let's move on to Wolfe Research for the next question.

This is Ivan here for Josh. Can you elaborate on what drove the slight downtick in NRR? And then when do you sort of expect that to go back to the double-digit range?

Well, I'm going to say first, I think it's teetering between 109% and 110%. If you think of our business generally, half of our NRR is from price escalation, the other half variously from the contributors to consumption otherwise. And then there's another 3%, which is from new names on top of the NRR that makes up our ARR growth as that is 11.5-ish or so percent. So it's all rather consistent, but round up or down, you could say they're from 9% to 10%, but I realize that's from 1 to 2 digits also. I think it's kind of accidentally in that range. But Werner, would you like to comment more quantitatively than that?

Yes. I think you were spot on like this. If I go to the numbers, I think it was like 9.45% rounding down to 9%. It is within that 9% to 10% range and it did drop down to 9%. So there's nothing really significantly driving kind of a shift from 10% to 9%. It's within that range and that's a solid range for us.

It's important to remember that Net Revenue Retention looks back two full years. There is still considerable pressure from China affecting this. At some point, the decline in Annual Recurring Revenue from China has to stabilize since it currently represents just 2% of our total. However, when comparing the past year to two years ago, the impact is quite significant.

Thanks. Last question will come from Mizuho Securities.

For the earlier mix up, wrong button. But excellent. So we also look at other vertical names like the Cadence, Synopsys. And one of the common themes we hear across all the verticals these days is the shortage of engineers and how AI is helping to kind of like help that problem through agentic AI. That is like the rave in the AI world these days. So given all the acquisitions and Cesium and the inroads into the AI world, I'm curious how you're thinking about agentic AI in your products going forward? Where are you in the process right now? And what's your vision going forward? And how does it help elevate the shortage?

Siti, I will have Nicholas respond, but I wanted to mention that quantifying consumption volume and the number of engineers is essential. I looked back at the data from Cambashi on the census of engineers. The past five years won't necessarily reflect the next five, especially with agentic AI on the scene. We've been seeing some effects from having fewer users, particularly in advanced economies where there are indeed fewer engineers. However, those that are present are spending more. It cannot be assumed that more engineers will emerge or that they will dedicate more time to single tasks since they will likely have agents handling some of that time. Nicholas may touch on the commercial implications of this. Overall, I am confident that each engineer will spend more. A unique aspect for infrastructure engineering is that many engineering firms have traditionally charged by the hour, and AI will certainly alter how they monetize their services. We're in a position to assist them in finding ways to be compensated for the value they generate over time. We are aligned with our users, helping them create significant value despite having fewer engineers doing more. They must receive proper compensation for that increase in value. We'll be measuring things differently and exploring incremental approaches. Nicholas and his team are already working on bringing one AI-based product to market, which is something to keep an eye on. Nicholas, I'll hand it over to you now.

Thank you for your question, Siti. It’s a great way to wrap up this discussion as it really touches on the future of infrastructure. AI is a common theme in every conversation I have with CEO's of engineering services firms, as it’s very much on their minds. With the current landscape of high demand and a shortage of engineers, these firms are actively embracing AI. They are starting to integrate AI into routine business tasks, much like many of you might already be doing. Additionally, they are increasingly utilizing AI for engineering-specific tasks, beginning with leveraging software vendors’ capabilities. For instance, a major global engineering services firm is utilizing our solution, Blyncsy, for asset analytics in road monitoring. They are also keen to apply the capabilities we are developing for design. As for agentic AI, I anticipate we will indeed see a significant boost in productivity from these firms. We are focusing on core engineering design work, where AI can automate repetitive tasks that take away from the engineers' essential work, like automating drawing production. Last year at YII, we announced early access to our site engineering application, OpenSite+, and I look forward to sharing the advancements at this year's YII. The engagement with this product is quite remarkable, and everyone recognizes its potential not just for this product, but for a range of other engineering disciplines and applications. While we’re working on making this product widely available, we’re also expanding its capabilities to other engineering applications. Many engineering service firms are building their own teams of AI specialists and data scientists, creating their AI agents. We believe we are well-positioned to assist them, as many are utilizing Bentley Infrastructure Cloud to manage their engineering files, whether from us or other vendors. Our platform is open and can handle various file formats. Importantly, when we process these files, we map the data to a schema that makes it accessible for AI. This positions us beautifully to help firms leverage past designs, giving context to AI agents for future recommendations. We are just at the beginning of this journey, but the ongoing developments are encouraging and exciting. We will discuss this further at our annual conference later this year. To conclude, the potential productivity gains for everyone in the infrastructure ecosystem through AI will likely lead to a redistribution of value, shifting business models, and possibly even changing our own business model to adapt to these changes.

Thanks. We have one more. Dylan popped on from William Blair.

Maybe, Nicholas, to that point in particular as well, too, it sounds like the idea of permitting reform kind of coming through incremental productivity and maybe conviction that you're seeing from customers with higher floors on kind of the E365 collars, if you will. Wonder how you think about kind of that evolution playing out from a pricing perspective as they are maybe able to work through those backlogs a bit faster, draw down on that spend faster. Does that mean accelerated growth for Bentley? Maybe is it into the durability of that growth? Like how should we be thinking of the implications within the pricing structure?

The confidence we're observing from our clients, both large and small, is evident in the current renewals and among our larger accounts. We've agreed on both higher minimum and maximum pricing, averaging around a 10% increase, which reflects this confidence. From a pricing perspective, we ensure that we capture our fair share of the value our software delivers. Generally, we have maintained consistent price increases in the mid-single digits. During periods of high inflation, we kept our increases reasonable, allowing us to continue raising prices in that range. Regarding AI, while I'm not discussing specific prices, we are considering adjustments to our pricing metrics. Our applications typically rely on user counts, whether through subscriptions for SMBs or usage-based pricing for enterprise accounts on E365. We have several applications designed for asset operations that use different metrics, like the number of assets, particularly with AssetWise and our new asset analytics applications for road monitoring and cell towers. However, for AI in design, feedback from initial users testing OpenSite+ suggests that it may be premature to completely overhaul our pricing metrics. We still require a user component, but application-based pricing might not effectively reflect the software's value since productivity gains are significant. Therefore, we plan to start with a term-based subscription, with additional charges to apply once AI usage exceeds normal expectations for an engineer's workload. This approach will evolve as we continue discussions with our clients to determine what is appropriate moving forward. We see potential for alternative pricing structures, but this will take some time as we are still in the early stages.

I want to emphasize that we will definitely promote our Year In Infrastructure conference in Amsterdam this October. Many of you have found it to be a valuable experience. This year, we're excited to showcase the finalists for the Going Digital Awards, who will present their projects and discuss their use of AI. I was quite impressed by the innovative ways they are applying AI, which we hadn't anticipated. We announced the finalists earlier this week, and there are 9 from the U.S., 10 from Europe, and about 18 or 19 from Asia. This highlights the global landscape of innovation. I hope you can join us in Amsterdam. Regarding your question about permitting reform in the U.S., it appears there won't be one comprehensive permitting reform bill. However, the ongoing developments are encouraging and facilitating infrastructure investments, particularly for the electric grid. I want to clarify that data centers are not the primary cause of the grid's strain; they are simply adding to an already overloaded system that is running beyond its design capacity, raising concerns about resilience, as we've seen in other places globally. Nicholas also mentioned that in addition to Power Line Systems, Seequent is beginning to see positive signs with new mining projects. While we think it's premature to declare a definitive shift, we may provide further updates at the Year in Infrastructure conference. I hope to see you there. While I may not be present due to Nicholas, the discussions in October in Amsterdam will definitely be worthwhile.

Thanks, Greg. That concludes our call today. We thank you for your interest and time in Bentley Systems. Please reach out to Investor Relations with further questions and follow-ups, and we look forward to updating you on our performance in the coming quarters. Thanks.

Thank you.